nep-bec New Economics Papers
on Business Economics
Issue of 2023‒10‒16
eleven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Firm Expectations and News: Micro v Macro By Benjamin Born; Zeno Enders; Manuel Menkhoff; Gernot J. Müller; Knut Niemann
  2. Big Data Analytics and Exports - Evidence for Manufacturing Firms from 27 EU Countries By Joachim Wagner
  3. The Effects of Subsidies on Firm Size and Productivity By Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
  4. Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology By Filippo Biondi; Sergio Inferrera; Matthias Mertens; Javier Miranda
  5. Centralization and Organization Reproduction: Ethnic Innovation in R&D Centers and Satellite Locations By William R. Kerr
  6. Frictions and Adjustments in Firm-to-Firm Trade By Francois Fontaine; Julien Martin; Isabelle Mejean
  7. Firm‐specific pay premiums and the gender wage gap in Europe By Jan‐luca Hennig; Balazs Stadler
  8. Credit Supply Shocks and Firm Dynamics: Evidence from Brazil By Samuel Bazzi; Marc-Andreas Muendler; Raquel F. Oliveira; James E. Rauch
  9. Endogenous timing in an international mixed duopoly with a foreign labor-managed competitor By Ohnishi, Kazuhiro
  10. Low-Wage Jobs, Foreign-Born Workers, and Firm Performance By Amuedo-Dorantes, Catalina; Arenas-Arroyo, Esther; Mahajan, Parag; Schmidpeter, Bernhard
  11. Vacancy posting, firm balance sheets, and pandemic policy By Van Dijcke, David; Buckmann, Marcus; Turrell, Arthur; Key, Tomas

  1. By: Benjamin Born; Zeno Enders; Manuel Menkhoff; Gernot J. Müller; Knut Niemann
    Abstract: Using firm-level data, we study how firm expectations adjust to news while accounting for a) the heterogeneity of news and b) the heterogeneity of firms. We classify news as either micro or macro, that is, information about firm-specific developments or information about the aggregate economy. Survey data for German and Italian firms allows us to reject rational expectations: Both types of news predict forecast errors at the firm level. Yet while firm expectations overreact to micro news, they underreact to macro news. We propose a general-equilibrium model where firms suffer from ‘island illusion’ to explain these patterns in the data.
    Keywords: Survey data, salience, overreaction, underreaction, micro news, macro news, island illusion, business cycle
    JEL: D84 C53 E71
    Date: 2023
  2. By: Joachim Wagner (Leuphana Universität Lüneburg, Institut für Volkswirtschaftslehre)
    Abstract: The use of big data analytics (including data mining and predictive analytics) by firms can be expected to increase productivity and reduce trade costs, which should be positively related to export activities. This paper uses firm level data from the Flash Eurobarometer 486 survey conducted in February – May 2020 to investigate the link between the use of big data analytics and export activities in manufacturing enterprises from the 27 member countries of the European Union. We find that firms which use big data analytics do more often export, do more often export to various destinations all over the world, and do export to more different destinations. The estimated big data analytics premia for exports are statistically highly significant after controlling for firm size, firm age, patents, and country. Furthermore, the size of these premia can be considered to be large. Successful exporters tend to use big data analytics.
    Keywords: Big data analytics, exports, firm level data, Flash Eurobarometer 486
    JEL: D22 F14
    Date: 2023–09
  3. By: Bearzotti, Enia; Polanec, Sašo; Bartolj, Tjaša
    Abstract: This paper evaluates the impact of varying subsidy sizes and distinct program objectives on firm size and performance. The magnitude of treatment effects increases with subsidy size, although the marginal effects tend to decrease. We also find that treatment effects differ across subsidy programs due to their distinct objectives. Among these, labor-support measures are most effective at supporting employment, capital, and output while being most harmful to productivity. Contrary to theory, subsidies providing incentives for investments have no impact on capital or productivity. The treatment effects tend to decrease over time and are thus temporary. As recipient firms are more likely to receive additional support in the future, the effects of subsidies accumulate giving rise to permanent differences between subsidized and non-subsidized firms. However, the lack of productivity improvements in such firms questions the benefits of repeated supporting measures.
    Keywords: Subsidies, Firm Growth, Firm Performance, Industrial Policy
    JEL: H25 L25 L52
    Date: 2023–09–06
  4. By: Filippo Biondi (KU Leuven and Research Foundation Flanders (FWO)); Sergio Inferrera (Queen Mary University of London); Matthias Mertens (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet)); Javier Miranda (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet))
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
    Keywords: Business dynamism, productivity, responsiveness of labor demand, market power, European cross-country data, technological change
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023–10–25
  5. By: William R. Kerr
    Abstract: We study the relationship between firm centralization and organizational reproduction in satellite locations. For decentralized firms, the ethnic compositions of inventors in satellite locations mostly resemble their host cities, with little link to the inventor composition of their parent firms' R&D headquarters. For highly centralized firms, by contrast, organizational reproduction has an explanatory power equal to half or more of the host city effect. Reproduction is strongest when a firm exhibits a hands-on approach to the satellite facility, such as cross-facility team collaboration or internal talent mobility.
    JEL: F22 F23 J61 L22 L25 M51 O31 O32 R11 R12
    Date: 2023–09
  6. By: Francois Fontaine (Paris School of Economics); Julien Martin (University of Quebec in Montreal); Isabelle Mejean (Sciences Po)
    Abstract: We build a dynamic Ricardian model of trade with search frictions.The model generates an endogenous network of firm-to-firm trade relationships and price bargaining within and across relationships. Following a foreign shock, firms sourcing inputs from abroad have three options: absorb the shock, renegotiate with their current supplier or switch to a supplier in another country. The size of these adjustment margins depends on the interplay between Ricardian comparative advantages, search frictions and firms’ individual characteristics. We exploit French firm-to-firm trade data to estimate the model structurally and quantify the relative importance of these adjustment margins at sector-country level.
    Date: 2023–05
  7. By: Jan‐luca Hennig (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Balazs Stadler (OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)
    Abstract: We study how firm premia influence the gender wage gap for 21 European countries. We use a quadrennial harmonized matched employer-employee dataset to estimate gender-specific firm premia. Subsequently, we decompose the firm-specific wage premia differential into withinand between-firm components. On average, the former accounts mainly for the decline in the pay gap between 2002 and 2014. We pay particular attention to the development of each component by age group, and find that the between-firm component is associated with an increase in the gender pay gap over age. The decomposition of firm premia allows us to investigate how institutional settings relate to each component. We associate the within-firm component with collective bargaining at the national and firm levels, and the between-firm component with family policies. Decentralized wage bargaining is associated with a larger within-firm pay gap, whereas family policies incentivizing women to return to employment after family formation are linked to a smaller between-firm component.
    Date: 2023–04
  8. By: Samuel Bazzi; Marc-Andreas Muendler; Raquel F. Oliveira; James E. Rauch
    Abstract: We explore how financial constraints distort the entry decisions among otherwise productive entrepreneurs and limit growth of promising young firms. A model of liquidity-constrained entrepreneurs suggests that the easing of credit constraints can induce more entry of firms with greater long-run growth potential than the easing of conventional entry barriers would bring about. We explore this growth mechanism using a large-scale program to expand the supply of credit to small and medium enterprises in Brazil. Local credit supply shocks generate greater firm entry but also greater exit with no effect on short-run employment growth in the formal sector. However, credit expansions increase average capability among entering firms, which enter at larger size, survive longer, and grow faster. These firm dynamics are more pronounced in areas with weaker credit markets ex ante and consistent with local bank branches using cheap targeted credit lines to expand lending more broadly. Our findings provide new evidence on the general equilibrium effects of credit supply expansions.
    JEL: D21 D22 D92 L25 L26 M13 O12
    Date: 2023–09
  9. By: Ohnishi, Kazuhiro
    Abstract: This paper considers an international mixed duopoly model in which a state-owned public firm competes against a foreign labor-managed firm. The paper investigates endogenous roles of the firms by adopting the observable delay game and shows that the state-owned public firm should never play the role of Staclkelberg leader.
    Keywords: Endogenous timing; Foreign labor-managed firm; International mixed duopoly; Stackelberg
    JEL: C72 D21 F23 L30
    Date: 2023–09–11
  10. By: Amuedo-Dorantes, Catalina (University of California, Merced); Arenas-Arroyo, Esther (Vienna University of Economics and Business); Mahajan, Parag (University of Delaware); Schmidpeter, Bernhard (University of Linz)
    Abstract: We examine how migrant workers impact firm performance using administrative data from the United States. Exploiting an unexpected change in firms' likelihood of securing low-wage workers through the H-2B visa program, we find limited crowd-out of other forms of employment and no impact on average pay at the firm. Yet, access to H-2B workers raises firms' annual revenues and survival likelihood. Our results are consistent with the notion that guest worker programs can help address labor shortages without inflicting large losses on incumbent workers.
    Keywords: guest workers, migrants, employment, firm dynamics, H-2B visa
    JEL: J23 F22 J61
    Date: 2023–09
  11. By: Van Dijcke, David (Department of Economics, University of Michigan); Buckmann, Marcus (Bank of England); Turrell, Arthur (Data Science Campus, Office for National Statistics); Key, Tomas (Bank of England)
    Abstract: We assess how balance sheets propagated labour demand shocks during Covid-19 using novel matched data on firms and online job postings. Exploiting regional and firm-level variation in three pandemic policies in the UK, we find that financially healthy firms increased vacancies more in response to positive shocks. Less-leveraged firms and firms with higher credit scores increased postings more in response to the Eat Out to Help Out’s local demand subsidies and after receiving a Bounce Back Loan Scheme loan, respectively. These findings complement the link between leverage and employment losses in response to negative shocks.
    Keywords: Covid-19; recession; vacancies; Indeed; job postings; job ads; heterogeneity; firm; firm-level; balance sheets; industry; big data; alternative data; labour market; natural language processing
    JEL: C50 D20 G30 H10 J20 J60
    Date: 2023–07–21

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